12 years ago, everyone and their grandmother were quitting their jobs to become stay-at-home-investors. Fastforward 12 years, and the words “stock market” have become synonymous with “you-know-who (or more appropriately, you-know-what)”. So what happened?
You Can’t Fool Me Thrice (At Least, Not Thrice In A Decade)
Imagine you’re in a boxing match with Muhammad Ali and every time you get the courage to take a punch, you get the lights knocked out of you before you figure out what the the hell’s going on. After 2 times, you’re probably ready to hide in a hole and quit. Like my little story, every time the average Joe presses the BUY button on his computer screen, a river of red ink starts flowing. In the meantime, the headlines are populated with stories like “Whiz Kid Makes $15 million a Year!” and the Fortune 500 list is being conquered by Wall Street assholes. Meanwhile, the Fed Chairman, who really doesn’t give a damn about the average guy, sides with the financiers against Main Street and parties at Lloyd Blankfein’s bajillion square feet mansion. Thus, the perception that the stock market is rigged becomes prevalent, and who can be fooled more than three times into playing a rigged game?
Everything You Told Me Was A Lie!
My Hollywood dream was shattered when I went to Universal Studios as a young kid: everything was fake! The flash floods was really just blown out facets squirting water, the Western towns were really 2 dimensional cutouts, and the Navy battles were really just kiddie battleships loading with small fireworks. In the meantime, everything we were told about finance turned out to be a lie:
- The ratings agencies are full of crap – they’re paid by the same companies they’re supposed to rate.
- The politicians in Washington are full of crap – they have no friggin’ clue how the economy works.
- The Wall Street charms are full of crap – there’s no such thing as “just put a little money into the magical markets, and with a bit of luck, you’ll make millions!”
The cynicism has pretty much taken over the public’s investment attitude – “Why the hell would I want a CDS? Who knows what that piece of crap will be worth in 30 years. Hell, I might not even be alive in 30 years!”
Brother, Can You Spare A Dime?
The biggest casualty of this recession is the just-out-of-college generation; wages are falling, no one’s hiring (unless you plan on a career at McDonald’s), and the people who should be retiring and vacating their positions aren’t retiring. More and more young adults are moving back in with their parents – an unthinkable act 10 years ago. With tens of thousands of dollars in student loans, investing in the stock market is not a possibility for many youngsters.
In addition, many people who just missed the retirement train by a few years watched their life savings evaporate before their very eyes. Don’t count on those broke people to invest in the markets.
“Time Goes By, Time Brings Changes, You Change Too….”
The biggest generation, the Baby Boomers, have eaten their way through what society has to give. Everything this generation touched is now crumbling: public pension funds, national infrastructure, social programs, etc. The end result? A massive financial burden (dare I say Ponzi Scheme) that the current generation of working adults must carry on their shoulders. And with fewer and fewer children being born, every generation will have to carry more and more of the burden on their shoulders. The government will need to tax more and more to make up for the widening financial gap, and guess what? With less and less left-over income, the public will put investing in the stock market lower on its list of priorities.
What The Hell Happened To Karma?
Western civilization loves to repeat the words “what goes around comes around”. Thus, it is only logical that those Wall Street bastards who created the financial crisis should get what’s due for them. Except, what’s due for them isn’t God’s wrath – it’s more bailouts, more money, and a golden package! This lack of fairness in modern society has destroyed many’s faith in society and the faith in the free market of financial capitalism.
The Future
But don’t worry everyone! Like the Solomon Brothers’ belief that suckers will come back to get punched over and over, we can be sure that the public will come back to get slaughtered the next time a bubble balloons. People have short memories.
This post perfectly summarizes many, many conversations I’ve had with people over the last few years. I agree that people have very short memories, the problem is that if you don’t know history…it’s doomed to repeat itself.
Ray Dalio recently did an interview on CNBC. You should watch it – he talks a lot about history in it.